Does Trade Policy Uncertainty Affect Corporate Financialization: From the Perspective of Corporate Uncertainty Perception

Jingling Wang

doi:10.54691/47snj484

Authors

Jingling Wang

DOI:

https://doi.org/10.54691/47snj484

Keywords:

Corporate Perception of Trade Policy Uncertainty, Financialization, Portfolio Allocation.

Abstract

In the current period of “growing uncertain and unpredictable factors” in China, corporate financialization is regarded as one of the major challenges to “consolidating and expanding the foundation of the real economy”. Therefore, based on the sample of Chinese A-share listed companies from 2007 to 2024, this study uses the text analysis method to measure the enterprise-level trade policy uncertainty perception index, and identifies its impact on corporate financialization and the underlying mechanism. The empirical results show that corporate perception of trade policy uncertainty significantly inhibits the allocation of financial assets. Mechanism analysis indicates that it exerts its effect by exacerbating managerial short-termism and amplifying cash flow volatility. Extended analysis reveals that the aforementioned inhibitory effect is more prominent in enterprises with a lower degree of market competition or stronger external supervision. The conclusions of this paper have enlightening significance for policymakers to understand the law of how uncertainty affects corporate financialization behavior and to “consolidate and expand the foundation of the real economy”.

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